Chinese chasing European capital

Every weekend in the center of People's Park in Shanghai, local parents place placards with details of their unmarried offspring printed or scribbled on the front. Transparency is key for the crowds of like-minded parents who block the tree-lined paths to play cupid for their grown-up children. Degrees and exam grades are disclosed alongside heights, weights and whether the son or daughter in question still lives at home. A photo album is available on request. Every September for the past six years, Deutsche Börse has played a somewhat similar role for Chinese small and mid-sized companies looking to list or raise extra capital in Frankfurt, Germany. This year's event, held at the slightly more auspicious Shangri-La hotel in Pudong, attracted a room full of Chinese business people keen to learn how to attract investment from Europe. Why they would want to was not immediately clear. The overriding message from the podium was: the IPO market in Europe is currently closed, please go home and prepare for when it might reopen. Exactly when that might be, nobody knows. The future of Chinese companies in Europe is equally uncertain: ever since the Sino-Forest accounting scandal blew up in the US earlier this year, Chinese firms have become the least popular guests at the investor party. 'This year was supposed to be the best year ever for Deutsche Börse in terms of Chinese IPOs,' says Alexander von Preysing, head of issuer services at Deutsche Börse. 'If you look only at the number of IPOs in the first half of this year, it is an upward trend and there are a lot still in the pipeline. But due to the volatility and turmoil in the financial markets, the capital those companies have been able to raise has been disappointing for us, for investors and for the companies themselves.' To put this in context, €1.6 bn ($2.2 bn) has been raised by primary issuers on the Frankfurt Stock Exchange so far this year, in comparison to the €17 bn placed by companies already listed with Deutsche Börse. 'The IPO pipeline is also blocked at the moment,' von Preysing continues. 'All the companies are postponing their IPO and preparing for when the window reopens.'Getting together As for the Chinese companies, there may be a block in the pipeline in Europe, but the backlog of companies waiting to list in China is as long as four years, according to Oliver Kuan, CFO of United Power, the Germany-listed Chinese manufacturer of generators. That is far too long to wait for capital-hungry Chinese companies being wooed by a growing list of western exchanges. Deutsche Börse says New York exchanges have much higher listing fees and a higher regulatory threshold. The increased time difference is also an issue, Kuan points out, although that did not stop NASDAQ OMX signing a cooperation agreement with Beijing's Zhongguancun National Innovation Demonstration Zone in late September. To avoid the shaky relationship between Chinese companies and German investors hitting the rocks, Deutsche Börse is looking to reacquaint these estranged parties at the German Equity Forum in Frankfurt in late November. Most if not all of the 34 Chinese companies listed on the Frankfurt exchange will be in attendance, according to von Preysing, where they can expect the introductions to investors to be more interventionist than the comparatively safe forum in Shanghai. On the agenda for this year is a four-hour-long 'speed investing' session, where a select number of investors and companies rotate around 20-minute meeting slots. In a related twist, there will also be a 'matching dinner', where 50 investors and 50 firms will swap dinner tables between courses, with no advisers or intermediaries present.